Three Megatrends of Entrepreneurship: Good News and Bad News

Drew Starbird MBA '84

A few weeks ago, the Kauffman Foundation released a new report on the State of Entrepreneurship in the United States. The report includes reasons to be optimistic as well as three "megatrends" that are cause for losing sleep.

First, the good news is that startup activity is trending upwards after dropping dramatically during the Great Recession. The survival rate of businesses is the highest it’s been in 20 years, and owner optimism has increased dramatically. However, along with these generally positive signs are some troubling patterns. These “megatrends,” as Kauffman calls them, have implications for education, policymakers, and others who are involved with the support of entrepreneurship.

Demographic InequityThe demographics of entrepreneurs does not reflect the demographics of the United States today. Relative to the general population, women, minorities, and people without formal education are far less likely to start businesses. In addition, over their lifetime, minority businesses start smaller and stay smaller than non-minority businesses.

Widening Rural-Urban DivideMid-size metro areas are experiencing more entrepreneurial activity at the same time rural areas are seeing less and less startup activity. Unfortunately, the rural-urban divide is getting wider. Entrepreneurship is mostly an urban phenomenon and rural startup activity as well as population are falling.

Disconnect Between Scale and EmploymentUnlike the past, growth in jobs is not proportional to revenue growth in the newest companies. The link between scale and employment is weaker than ever and reflects fundamental changes in the source of productivity improvement in new companies.

Should we be concerned about these trends? The answer is yes. These trends reflect inequity in the distribution of opportunity and of the benefits of economic growth. The reasons are debatable, but the impact is not. Santa Clara’s mission to create a more just and humane society charges us with the responsibility to address these challenges, unravel their causes, and correct them.

There are two things we can do as an institution and as a community to address these challenges. First, we need to support research that uncovers the root causes of these inequities. When we have a good understanding of the causes, we can design curricula and policy that will have a greater impact. Second, we need to support accessible education for aspiring entrepreneurs. By accessible, I mean that it is available and advantageous to people everywhere, from every background.

Megatrends like these are intimidating challenges. Fortunately, our community has the brains and backbone to face them.